The ERISA Industry Committee (ERIC) is pleased to take this opportunity to comment on Congressional health

Gretchen Young

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• Publié par: Shuwyor
• Nombre de lectures: 15
• Langue: English

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June 8, 2009 The
ERISA
Industry
The Honorable Max Baucus The Honorable Chuck Grassley Committee
Chairman Ranking Member
Committee On Finance Committee On Finance
U.S. Senate U.S. Senate
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, DC 20510-6200 Washington, DC 20510-6200

Dear Chairman Baucus and Ranking Member Grassley:

The ERISA Industry Committee (ERIC) is pleased to take this opportunity to comment on
Congressional health care reform proposals that are of critical importance to large
employers.

ERIC is an association committed to the advancement of the employee retirement, health,
incentive, and welfare benefit plans of America’s largest employers. ERIC’s members
provide comprehensive health benefits directly to some 25 million active and retired
workers and their families. ERIC has a strong interest in proposals that affect its members’
ability to continue to deliver high-quality, cost-effective benefits.

ERIC strongly supports reforms to the nation’s health care system that will increase its
efficiency, reduce costs, and extend health care coverage to those who are uninsured or
underinsured. Reining in health care costs is absolutely essential to this country’s future
economic success. Reforming the delivery and payment systems to achieve higher quality
health care are important building blocks for health care reform as well.

ERIC is concerned, however, that some reform proposals could compromise the successful
employer based system that currently provides health care to 170 million Americans who
strongly support its continued viability. These plans form the backbone of America’s
health care system and are important to the ability of employers to attract and retain the
talent they need to run their enterprises. When workers say that they value their health care
plans, and when policy makers stress that employees may keep the plans they like, they are
referring to employment-based health care.

Employer-sponsored plans provide quality health care to American workers and their
families. These plans extend health coverage that does not discriminate, financially or
otherwise, on the basis of gender, health status, age, or geographic location. Preexisting
condition limitations are strictly controlled. Major employer plans, in particular, cover
significant populations of employees that create a large pool, spreading risk and bringing
down the cost of coverage for employers and employees alike.
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www.eric.org The ERISA Industry Committee Page 2 of 6
June 8, 2009


Employer-sponsored plans are the source of much of the innovation in the nation’s health care
practices, and these plans lead the way in implementing prevention and wellness programs that address
chronic diseases and other core factors contributing to the escalation of health care costs in this
country. The employer-based system has been the source of more innovation and efficiency and
enjoys greater support among its beneficiaries than any other delivery system. The mechanisms and
principles that make it successful should be extended to those businesses, workers, and individuals
who currently cannot take full advantage of it.

ERIC is concerned that proposals addressing the following issues have the potential to seriously
undermine the current employment-based system:
• Taxation of health care benefits,
• The creation of a public plan,
• Employer mandates,
• Employee opt-outs, and
• National uniformity and ERISA preemption.

ERIC’s concerns with respect to each of these issues are detailed below.

TAXATION OF BENEFITS

Under current federal law, the value of employer-provided health benefits is not included in an
employee’s taxable income, nor are these benefits subject to payroll taxes. This favorable tax
treatment generally extends only to benefits provided through group health plans and, thus, is not
available for health insurance purchased by individuals; some proposals, such as ERIC’s New Benefit
Platform for Life Security, would extend the tax favored status of health care coverage to all
Americans.

Several proposals have been made to curtail the favorable tax treatment of employer-provided health
benefits. One proposal would eliminate the exclusion entirely. Others would impose a cap based on
the value of health insurance, an individual’s income, or a combination of the two. To our knowledge,
no proposals are under consideration that would reduce an employer’s ability to deduct expenses paid
for employee health care.

ERIC has serious concerns with limiting the ability of an employee to exclude from income the value
of employer-provided health insurance. If this exclusion were curtailed, employment-based insurance
could suffer. Young, healthy employees would exit their employers’ plans in search of cheaper
coverage rather than pay taxes on a more expensive plan. A plan that once had a favorable and
balanced risk pool would now be left with an older, sicker, more costly population whose premiums
would eventually become unsustainable. Loss of a large, viable risk pool would greatly diminish an
employer’s ability to offer efficient and innovative health care coverage to its employees. As the cost
of providing benefits increased, more employers would exit the system.

Some employers might feel pressure to increase wages to compensate employees for the additional
taxation of their health benefits. Most employers, however, would be faced with the bleak choice of The ERISA Industry Committee Page 3 of 6
June 8, 2009



severing some employees in order to increase the wages of others or taking no action in response to the
increased taxes and diminished take-home pay of their employees.

Further, a proposal to limit the tax-favored treatment of employer-provided health insurance would
raise difficult practical questions regarding the valuation of these benefits, especially when geographic,
age, gender, firm size, and other distinctions are taken into account. Imposing a cap on the exclusion –
let alone subjecting the entire benefit to taxation - would be very difficult, if not impossible, to
accomplish in an equitable or efficient manner. Determining the “value” of a benefit package or a
premium is an enterprise that has eluded the most sophisticated actuarial and economic modeling for
decades. Indeed, an effort to do so many years ago – section 89 of the Internal Revenue Code –
became so cumbersome and unpopular that it was repealed shortly after it was enacted.

The rationale for curtailing the exemption is principally that it would increase revenue to offset the cost
of reform. Another rationale is that taxing workers on their coverage would encourage them to use the
health care system in a more efficient manner. We are unaware of any comprehensive studies that
indicate that increasing taxes on consumers would result in more responsible decision-making or
health care consumption.

THE CREATION OF A PUBLIC PLAN

Although the parameters of a public plan have not been fully fleshed out – and in some cases the
outlines differ radically from one proposal to another – the gist of this recommendation is that a
government-run public plan would compete with the private sector to offer health care coverage.

We have several primary concerns with a government-run plan. First, the prospect of cost-shifting to
private employers from a public plan, replicating the pattern of Medicare and Medicaid, is daunting.
Under-reimbursing providers in a public plan will lead inevitably to higher provider bills for those in
private plans. Health care costs are already rising at an unsustainable rate; an increased level of cost-
shifting would accelerate the point at which employers would no longer be able to afford quality health
care for their employees. Indeed, the example of Medicare’s fiscal unsustainability should raise a
warning flag.

Second, if a government-run plan were to be subsidized or otherwise able to operate on a non-level
playing field with the private sector, this would lead to a weakening of private insurance. Eventually,
cheaper public plans - not held to the same financial requirements or other standards as private plans -
would “crowd out” private plans, and employees would be left with no viable option to a government-
run health plan.

Crowding out would have an immediate adverse impact on the development of practices to improve
the quality of health care and the pursuit of innovative strategies to bring health care costs under
control that are core strengths of the employment-based system.

In addition, we question whether it is an appropriate role for the government to establish an enterprise
to compete with private sector plans, particularly if these enterprises do not face the same economic
and fiscal restraints to which private plans are subject.
The ERISA Industry Committee Page 4 of 6
June 8, 2009



EMPLOYER MANDATES

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